Pre-IPO VCF investment will be locked in for 12 mths: Sebi

From Financial Express
October 17, 2006

The Securities and Exchange Board of India (Sebi) has tightened the investment guidelines with respect to venture capital funds (VCFs) and foreign venture capital investors (FVCIs) registered with it. The regulator has decided to impose a lock-in period of 12 months on all pre-initial public offer (IPO) investments made by VCFs/FVCIs. Prior to this amendment in the DIP guidelines, shares held by VCFs and FVCIs were exempted from the lock-in period. The amendment regarding lock-in will be applicable to all offer documents, which are yet to be registered with the Registrar of Companies (RoC). Sebi said, the move is in order to make the Indian primary market more efficient and transparent. As per the new policy, shares held by Sebi-registered VCFs or FVCIs for a period of at least one year as on the date of filing the draft prospectus with Sebi will attract a lock-in of one year. Also, shares issued to Sebi registered VCFs/FVCIs upon conversion of convertible instruments will also attract a lock-in of one year. That is if, during the period of one year prior to the date of filing draft prospectus with Sebi, if any convertible instrument is converted into equity, than these shares will also attract a lock-in, provided that the period of holding such convertible instruments as fully paid up, together with the period of holding shares resulting from conversion, is at least one year as on the date of filing the draft prospectus with Sebi. The amendment gains significance as there are close to 80 VCFs registered with Sebi while there are more than 51 Sebi registered FVCIs. The players in the industry said the move by the regulator may be to discourage the entry of fly-by-night operators who want to take advantage of the booming Indian corporate sector. Also, some of the players were of the opinion that even if this provision of lock-in may prove to be a dampener for some, investments in deserving Indian companies will continue as private equity players who are qualified institutional investors, have faith in the long term India story.

NDTV posts July-Sept net profit of 37 mln rupees

From Reuters.com
October 17, 2006

News broadcaster New Delhi Television Ltd. said on Tuesday it had posted a net profit of 37 million rupees on revenue of 545 million rupees for the July-September quarter. The company had made a net loss of 52.7 million rupees and revenue of 430 million rupees in the same period last year. The board also approved setting up a unit, NDTV Ventures, for expanding into non-news areas like entertainment and lifestyle channels and boosting its presence in the Internet. “The model enables NDTV to raise funds for its future businesses beyond news. The new company will incubate and operate focussed verticals,” the company said in a statement. The company would also launch city-centric information and entertainment channels in four centres “pretty soon”, Chairman Prannoy Roy told reporters. “We are looking to move into the main area of media which is entertainment,” Roy said. “Much of the work has already started on many of the projects and next year you will see them rolling out.” NDTV Ventures would start as the company’s wholly-owned subsidiary, but might raise funds through private equity or an initial public offer later. NDTV group had set a revenue target of $500 million in 5 years, Roy said.

Kotak pvt equity fund invests 30% of corpus in seven firms Mumbai

From Business Standard

October 17, 2006

Kotak Mahindra has invested about 30 per cent of its $160 million private equity fund in seven high-potential companies in India, even as it is in the final stages of making investments in two more companies. Nitin Deshmukh, head of private equity at Kotak, said the group is bullish on the alternative asset classes in India, which, in addition to private equity, also include real estate and venture capital, among others. The group, which recently raised $100 million for its real estate fund from domestic investors, is expected to garner another significant amount for this fund from overseas investors. The private equity fund titled India Growth Fund has been able to invest in a range of sectors, from home textiles to machine tools, agro-biotech to software products and drug discovery to aviation, Deshmukh said. “We are looking at investments in the range of $5-15 million per company, with a maximum limit of $20 million,” he said. “Out of the seven private equity transactions, four are proprietary transactions,” Deshmukh said, adding that the two forthcoming PE deals, which will be announced next month, will also be proprietary transactions. The PE investments by Kotak include home textiles company Sabre International, CNC machines maker Bharat Fritz Werner, agri-biotech company Metahelix Life Sciences, software product company Four Soft, power control equipment firm Dynaspede Integrated and South-based full-service airline Paramount Airways. Kotak, through its partner SEAF Management LLC of the USA, is assisting Indian companies to find new markets and relationships in geographies, such as South America, Eastern Europe, Central Asia and even China.

Wanbury to buy Farmaceutica’s generics business

Business Standard

October 17,2006

The board of directors of Wanbury, which met today, approved a proposal to acquire the branded generic business of Industrial Farmaceutica Cantabria, SA through Cantabria Pharma SL, a Spanish company, for approximately euro 50 million (approximately Rs 300 crore). According to a release issued by Wanbury to the BSE today, the meeting also cleared a plan to conduct a posal ballot for seeking shareholder nod to give loan(s) / guarantee(s) in favour of Cantabria Pharma SL, and Wanbury Holdings BV, a wholly-owed subsidiary company up to Rs 400 crore. The postal ballot will also seek shareholder approval to borrow euro 34 million for investment in Wanbury Holdings BV and/or Cantabria Pharma SL.

Tatas, Corus reach pact for $9bn deal

From The Economic Times
October 17, 2006

Tata Steel’s talks with the Corus management ahead of its possible bid for the British steel maker have been successful, people close to the development said. This might pave way for the Indian company to follow up with a formal offer valuing Corus at about $9bn. A formal announcement is expected by the end of this month. Tatas plan to float Singapore-based special purpose vehicle for takeover; group to raise $3.5bn, financial institutions to provide the rest. Combined entity to be 6th largest steel maker with annual capacity of 23m tonnes. World’s second largest steel deal to put Tata in Top 10 club. “The British steel maker has positively responded to Tata Steel and is convinced about the synergy between the two companies’ operations,” said sources. The development almost puts to rest the intense speculation in the British media about Russian and Brazilian companies also vying for a stake in Corus. The deal, slated to be the biggest ever in the history of India Inc, is estimated to be worth $9bn, sources said. While Tata Steel and the Group holding company Tata Sons will raise almost $3.5bn, the rest will be raised through financial institutions. A source involved with the transaction added that the Tatas may float a special purpose vehicle in Singapore for the purpose. Standard Chartered Bank, ABN Amro and Deutsche Bank are working on raising the fund for the Tatas. Top officials from Tata Steel are travelling to Singapore this week for a board meeting of subsidiary company NatSteel, which was acquired in 2004. “From Singapore, they might go to London for talks with the Corus management,” sources said. A Corus spokesperson declined to comment, citing that the company is in offer period (according to British takeover code) and will make formal announcements “in case of any developments”. A Tata Steel spokesperson said the company does not wish to comment on speculative reports based on unconfirmed sources. Tata Steel shares rose 01% at Rs 511.35 at the BSE on Monday, when a bullish Sensex recorded a new high. Tata Steel had been talking to the Corus management for some time now. It wants its bid to be perceived as friendly and is anxious to avoid the political furore that greeted Mittal Steel when it made its unsolicited bid for Arcelor in January. The deal, if and when it happens, will further consolidate the global steel industry and will put Tata Steel among the top 10 steel companies in the world. The new entity will become the sixth largest steel manufacturer with annual production of at least 23m tonnes per annum. At present, Tata Steel occupies the 55th spot with production at 5.2m tonnes per annum and Corus, with 18m tonnes, is the eighth largest globally. The deal, which will be the second largest in the global steel industry, will also put an end to Corus’ anxious search for a partner with captive raw materials and operations in emerging markets. The company does not own any iron ore mines and has been facing rising fuel costs in its largely Europe-based facilities. As earlier reported in ET and as has been a practice in other Tata acquisitions, Tata Steel will retain the top management of Corus in the new entity. The Indian company is also expected to unleash major human resource initiatives to rope in Corus’ almost 50,000 employees. Other than getting access to specialised steel-making and Corus’ considerable R&D expertise, Tata Steel would also inherit the British steel maker’s market presence in auto and construction sectors. It would also fit in with Tata Steel’s strategy of becoming a low-cost, efficient supplier of hot metal to value-added steel plants in major markets. The acquisition of Singapore’s NatSteel and Thailand’s Millennium Steel was a part of this grand plan.

Actis, GIC Invest $65 Million In Southern Food Company Nilgiri’s

From Google News

October 16, 2006

The much talked about Actis’ investment in Nilgiri’s group is through. The private equity fund has issued a statement saying it has invested $65 million in the south-based food brand Nilgiri’s group. GIC Special Investments Ltd of Singapore has joined Actis in making this investment. The Nilgiri’s group has been in operation for the last 100 years and is one of the best known food brands in South India. Its products include dairy and dairy products, bakery, chocolates and variety of other local foods and snacks. All of its products are sold under the brand “Nilgiri’s 1905”. It operates on a franchise model and its franchise network has a strong foothold in Bangalore and Chennai, as well as the Coimbatore and Erode markets. The funding provided by Actis will be used to expand the company’s South Indian franchise network and strengthen its supply chain and distribution capacity as well as to expand the group’s food manufacturing operations. Announcing the investment, Donald Peck, Managing Partner of Actis in South Asia said, “Actis’s value-add is in providing strategic direction to the group, bringing in new management, as well as best-of-breed industry practices.” Raja Chellayan, a member of the Nilgiri’s family, is the new chairman of the company. (Former Lotte India MD N C Venugopal may be Actis’ choice to run the company, although there is no mention of this in the statement). Actis invests in India through two funds – the $325 million Actis India Fund 2 and the $150 million South Asia Fund 2. This transaction is Actis’s fourth major investment in India this year (2006). In September, Actis invested $42 million in Paras Pharmaceuticals Ltd, one of India’s leading OTC healthcare and personal care companies based in Gujarat. In July, Actis invested $15.5 million to fund the expansion of Sterling Hospital, a business in which Paras is the other principal shareholder and one of India’s leading hospital brands. And in March, it invested $30 million in Dalmia Cement – a leading manufacturer of cement in South India.

Private Equity firms flock to IT sector, PE investors were involved in 32 deals worth $317 million

From CyberMedia India Online

October 13, 2006

Investor interest in Indian IT and the ITES companies is on the increase this year with PE firms investing in 32 deals worth about $317 million. According to a survey by Chennai-based research agency, IT and ITES re-emerged as the favorite industry among PE investors during the latest quarter. The manufacturing industry followed with 14 deals worth $289 million. PE firms are investing in various stages of a company’s growth. They have invested across all stages in this industry during the recent quarter – from early-stage (companies like Paymate and Travelguru) to growth stage (Insilica and IMImobile) to late-stage (Microland) to already listed companies (Allsec, Rich Crest and Subex). Most PE investors preferred late-stage and growth-stage investments. Some of the top investments in the IT sector in the July-September period include $100 million investment into Quatrro BPO by Olympus Capital; $18 million into inSilica by a group including Intel Capital, Flextronics, Crossbow Ventures, Dow Ventures and NewPath Ventures, Allsec Technologies that received $17 million from Carlyle. In terms of exits, PE and VC firms obtained exit routes in three IT and ITES companies during July-September 2006. The $224 million NYSE IPO of WNS Global Services, India’s second largest BPO firm, was the largest PE-backed IPO during the period. WP, which held a $64.7 per cent stake prior to the IPO, is estimated to have realized about $29.8 million as part of the issue. Other exits include GVFL exiting out of Parsec Technologies by selling its stake to the company’s promoters and M2W – the Chinese subsidiary of Mumbai-based Mobile2win (which had Softbank China and Siemens Ventures as investors) that was acquired by Walt Disney in September.

Integreon eyes private equity investors for buyout

From Indiatimes Infotech

October 12, 2006

Integreon, a Mumbai-based BPO, is all set to induct a private equity investor to do a management buyout from the existing set of venture capital funds in the company. HSBC Private Equity Fund is said to be interested in the investment, though the news could not be confirmed from the management or the fund. The management is raising close to $20m to buy out Insight Venture Capital and will then go to market to raise funds for acquisitions. Company officials refused to comment on the development, but a final announcement is expected to be made on Thursday. According to sources, the company is looking at growth capital and is likely to use fresh resources to fund an acquisition. Integreon is among the large content outsourcing companies from India. The company has around 1,000 employees and revenues of more than $15m. The company is funded by Insight Venture Capital, which had invested through ConnectCapital India. ConnectCapital is an Indian affiliate of Insight Ventures and has invested in number of BPO and outsourcing related companies in India. Integreon, which started out as a BPO, gradually took bigger steps to move to high-end outsourcing services. Currently, it operates in verticals like knowledge services, e-publishing, business administration services and discovery support services. Under knowledge services, Integreon offers research in areas of investment, business, market and legal research to forty five odd clients in the US and Europe. Integreon, which started operations in Mumbai in 2000, has been growing both organically and through acquisitions. The company has been targeting smaller BPO companies with domain expertise. In April 2003, the company acquired Contentscape, a company specialising in web content design and development for less than $5m. Prashant Chawla from Contentscape was then appointed as COO and country head of Integreon. In July ‘05, the company acquired Brahmy Solutions, a UK-based high-end analytics company for around $10m. Early this year, it acquired legal processing business of New York-based BPO Bowne for around $5-7m to provide financial and digital printing services. ConnectCapital is expected to sell majority holding to the new investor. The legal process and content publishing industry is a new emerging vertical in India. According to estimates, the total global spending on legal services is estimated to more than $250bn. The US alone accounts for more than two-thirds of the market. This shows that the market for servicing the US and other law firms is huge. India being a preferred outsourcing destination is getting lot of legal work from across the globe. Another advantage is that Indian legal system is quite similar to the US and Europe. Thus, legal firms in the US outsource work like litigation coding, patent drafting to their Indian counterparts since the cost arbitrage is substantial. Integreon competes with Pangea3, but is much bigger than its competitors in the legal outsourcing space. The company has recently bagged a large order from one of the largest legal firms in the UK to set up operations in Gurgaon.

IFC open to finance SEZs, invests in HDFC bank bondsThursday

From Zee News

October 12, 2006

International Finance Corporation, the private lending arm of World Bank, on Thursday said it is open to finance large special economic zones in India. “We are open to SEZs. We will be happy to finance large SEZs,” IFC executive vice president Lars H Thunell said here. He said the investment proposals should be good enough to be considered by the financial institution. Though the centre has cleared many SEZ proposals, funding these projects has become a problem as Reserve Bank has asked the banks to treat lending to SEZs on same parameters as to commercial real estte sector. That means banks have to give risk weightage of 150 per cent and make one per cent provisioning of the total amount lent to SEZs. IFC today invested USD 100 million in tier II bonds of HDFC Bank and gave USD 5,00,000 grant to an NGO to set up a fund to finance young entrepreneurs. The upper tier II bonds maturing in 15 years, carry an interest rate of 122.5 basis points (1.2 per cent) over Libor (London inter bank offered rate). “IFC`s investment in HDFC bank reflects our larger goal of developing and strengthening the financial sector in emerging markets,” Thunell said. This is the first domestic foreign upper tier II bonds issue after reserve bank came out with upper tier II norms, HDFC Bank Managing Director Aditya Puri said. The IFC investment (about Rs 450 crore) will help the bank, which raised Rs 740 crore in bonds after June this year, to significantly increase its capital adequacy ratio from 11.7 per cent.

Sale of Daewoo to Videocon in Trouble

From The Korea Times
October 10, 2006

The scheduled sales process of South Korea’s Daewoo Electronics to India’s Videocon is being delayed as there is disagreement over the sales price. Woori bank, one of Daewoo’s main creditors, said on Tuesday that it was uncertain when the two sides would agree on the conditions of the sale. The initial timeline for signing a memorandum of understanding (MOU) was the end of September. “The September deadline was only our hope”, said Park Ki-hoon of Woori Bank. “As of now, we cannot say when we will be able to bring about a result.” Daewoo, the third largest maker of consumer electronics in South Korea, has been in a workout program since 1999. Last month, creditors led by Woori Bank selected a consortium of Videocon and U.S. fund Ripplewood Holding as the primary bidder for Daewoo at a reported price of 670 billion won. The two sides said that they would sign an MOU within September and conclude the deal as early as December. But the talks have been prolonged as Videocon reportedly demanded a cut in the purchase price by up to 20 percent from its original bid. Woori’s Park refused to confirm the report, though he said some of it was true. A Daewoo official also admitted the discrepancy between Videocon’s offer and the creditors’ demands, and added the talks could break up. “If they fail to reach an agreement, then the reserve bidder will have their turn,” he said. MBK Partners, a private equity firm, was selected as the reserve bidder last month.Videocon is India’s largest consumer electronics maker, holding about 50 percent of the local TV market last year, mostly cathode ray tube TVs. The company has been looking for ways to strengthen its position in overseas markets such as the United States and Europe by buying out facilities of foreign firms. Last year, it acquired French firm Thomson SA’s color picture tube manufacturing facilities for $291 million, and the Indian unit of Swedish firm Electrolux for $76 million. Videocon is going to use the newly acquired facilities to produce flat-panel TVs as early as this December. MBK Partners, which could take over from Videocon, is a buyout fund set up by Michael Kim, a former senior executive of the Carlyle Group Asia. Financial News reported earlier this month that the fund is leading the bid for China Network Systems in Taiwan.

Pvt equity firms invest $5.4 billion in India till Sept 2006

From Business Standard

Oct 11,2006

Private equity firms made $5.4 billion worth investments in the country during the first nine months of 2006 and could infuse capital worth $ 7 billion by year-end. Highlights of the July-September quarter include Olympus Capital’s $100 million investment into Quatrro BPO Solutions, followed by Bank of Muscat and ICICI Ventures’ $90.7 million investment in Centurion Bank of Punjab. Among other major deals were ChrysCapital’s $66 million investment in UTI Bank, Warburg Pincus’ $66 million infusion into Aryan Coal Benefications and 3i’s $65 million PE investment in Gujarat Pipavav Port. Last quarter also saw venture capital investments against conventional fund raising instruments, getting prominence. A press release by Venture Intelligence said July-September quarter witnessed 100 venture capitalist deals amounting nearly to $ 1,894 million. The amount invested during the July-September quarter was 2.8 times than the same period last year and marginally higher than that during the April-June 2006 quarter. The study predicts that with opening of real estate sector, country could see higher venture capitalist investment this year. With the October-December quarter being a traditionally strong quarter for PE investments in India and with Real Estate investments being opened up further, we can expect to close the year with over $7 billion in investments. Information technology firms were on priority list of venture investors with this sector witnessing 32 deals worth $317 million, followed by manufacturing sector with 14 deals worth $ 289 million. The investors also preferred to invest at early stage companies as these investments grew to 20 per cent against last quarter’s 17 per cent. The share of PE investments in late-stage (35 per cent), growth-stage (15 per cent), PIPEs (14per cent ) and buyouts (4 per cent) was similar against immediate quarter, the study showed.

FabIndia plans major retail expansion with Rs 275 cr

From BharatTextile.com
October 09, 2006 11:06 PM

The retail handloom and handicrafts major, FabIndia aiming to increase outlets from the current 42 to 150 in the tier-III towns is planning to invest Rs 275 crores, William Nanda Bissell, MD of FabIndia Overseas Pvt. Ltd. said here on October 08. Currently, FabIndia are lining up new outlets for Amritsar, Shimla, Luchnow, Jamshedpur, Bhubaneshvar and Jalandhar; however further target is said to be the southern part of the country. William informed that company plans to raise funds through a combination of private equity, debt and internal accruals but the IPO route has been ruled out. However, in the past couple of years, FabIndia has entered tier-II cities on the back of rising disposable incomes.

Promoters of Fortis plan stake sale to Soros fund

From The Times of India
October 07, 2006

The promoters of Fortis Healthcare, a company promoted by the founders of Ranbaxy Laboratories, is close to selling a portion of their stake in the company, ahead of the proposed initial public offering (IPO). A fund owned by George Soros — Soros Private Equity Partners — and Blue River Capital are investing $50 million for a 10% stake in Fortis, according to sources. The private equity placement values Fortis at $500 million. When contacted Fortis Healthcare officials were unavailable for comment. Recently, the hospital chain filed a draft prospectus with Sebi for an IPO of around 57 million shares. The money raised will be used for repayment of loans taken to acquire Escorts Heart Institute and Research Centre and for expansion. Part of proceeds will also be used in the construction of two hospitals in National Capital Region. Out of the net offer to the public, at least 60% would be allocated to qualified institutional buyers, 5% of which will be available for MFs. Non-institutional investors would be allotted up to 10% of offering, while retail investors would be issued not less than 30%. JM Morgan Stanley, Citigroup Global Markets and Kotak Mahindra Capital are lead managers.

Providence buys 14%, Citi unit 6% in Idea

From Daily News & Analysis
October 05, 2006

The dealstreet buzz is that mobile telecom player Idea Cellular has offloaded a total of 20% stake in two private equity firms—Providence Equity Partners and Citicorp Venture Capital (CVC). It is learnt that Providence has picked up a 14% stake, while Citigroup’s private investment unit, Citicorp Venture Capital, has bought 6% stake, in Idea Cellular. A formal announcement on the Idea deal is expected in a day or two. Sources said Providence may have paid about $200 million for its 14% stake.When contacted, Idea Cellular officials were not available for comment. Idea Cellular’s IPO is also scheduled over the next few months. Merchant bankers have already been mandated for the Idea IPO. The Aditya Birla group holds nearly 98.3% stake in Idea Cellular, the fifth largest cellular company in India. In April, Birlas had purchased the entire 48.12% holding of the Tata group, which was its joint venture partner in Idea, for Rs 4,406 crore. Following that deal, Idea Cellular was valued at over Rs 9,000 crore. After buying the Tata stake in Idea, the Aditya Birla group had announced that it would sell around 33% of Idea Cellular. However, sources pointed out that only 20% has been offloaded so far. Significantly, the Idea deal coincides with a company announcement that it had attained a mobile base of 10 million in the country. Even as Idea operates in nine out of a total of 23 circles, it has applied to the government seeking a pan-India presence. Idea recently got the government permission to start its services in the lucrative Mumbai market as well. Providence is a $4.25-billion US-based private equity fund specialising in equity investments in communications and media companies around the world, according to information available on its official website.

Mirae Asset, Credit Suisse to set up AMCs; EM Capital launches two India-specific funds

From Business Standard

October 05, 2006

Foreign investors are not tired yet of chasing the India growth story. Korean financial services firm Mirae Asset and Swiss financial house Credit Suisse on Tuesday announced plans to set up asset management business in India and US-registered EM Capital Management LLC announced launch of two India-specific funds, each having over $200 million corpus. The two funds will invest in Indian capital markets and the private equity sector, respectively. Yet another entity, Kuvera Capital, a UK-based hedge fund, is expected to start investments in the Indian stock markets, sooner than later. All these announcements were made on Tuesday in Mumbai, on the first-day of the 3-day `Funds World – India 2006’ conference. The EM Capital India Discovery Fund will be different from other foreign institutional investors (FIIs) in its India strategy. “We will invest only in mid-cap and large small caps listed on Indian capital markets,” said its chief executive officer Seth R Freeman. Significantly, the near-peak levels in benchmark stock indices in India is not deterring these investors. “India, I presume, is different from other countries. India can afford to have a price to earnings ratio of 16.5 (one-year forward) as this was backed by a 20 per cent growth in corporate earnings and 8-9 per cent growth in the economy,” said Brad Durham of Emerging Portfolio Fund Research, which tracks foreign portfolio investments. Korea’s Mirae Asset, which is into broking to insurance and asset management, planned to enter the asset management business in India, its spokesman told Business Standard. Mirae Asset, which has already $800 million invested in the Indian equities through its Singapore office, is expected to raise another $200 million from Korean investors for investments in Indian stocks. “We raised $800 million from Korean about 18 months back for Indian equities. We are bullish of India,” the spokesman said. R E (Sandy) Shipton, head of asset management at Dubai International Financial Centre (DIFC), said Kuvera Capital, a hedge fund promoted by UK and Indian investors, has set up operations in DIFC for operations in the Indian equity markets. Durham of EPFC said the growing flow of funds into India was mainly owing to the realisation that the country’s economy was fuelled more by domestic demand, rather than exports. “In the third quarter (July-September), there was an outflow of funds from all emerging markets, except India. During the quarter, India saw an inflow of $ 600 million,” he said.

Buyouts on the rise in India, private equity revs up buyout tempo

From Business Standard

October 05, 2006

The domestic private equity (PE) segment, which has attracted investment worth billions of dollars in the last 12-18 months, is set to witness a host of buyout deals in the coming months where controlling interest in local businesses will change hands. Till now, most of the private equity deals involved sales of minority stakes in companies to private equity funds. However, the trend is set to change as cutthroat competition in almost all sectors is forcing managements of small and medium companies to exit their stakes to PE funds. PE funds bring in professional management to run the company and offload stakes later at a much higher value. PE funds Actis, Standard Chartered Private Equity (SCPE) and Warburg Pincus, which are specialised in acquisition transactions, have started executing such deals in the country. Recently, Actis bought controlling stake in south-based supermarket and dairy products firm Nilgiris Dairy for Rs 300 crore, making this perhaps the first major buyout deal. Barings PE fund’s investment in MphasiS BFL also happened to be an acquisition deal. Barings took the stake in the BPO as a pure private equity investment after it had sold off the stake to EDS. The competitive pressures following the opening up of several sectors will force managements to make way to professional management teams, which are backed by financial investors,” said Nainesh Jaisingh, head of private equity (India) at Standard Chartered, which has made PE investments in six companies in the country worth $175 million till now. Buyout deals typically involve MBO (existing management buyouts), MBI (new management buy-ins) and LBO (leverage buyouts). Some of the recent global acquisitions by domestic companies – Tata Tea’s acquisition of Energy Brands, Dr Reddy’s takeover of Betapharm, Suzlon’s acquisition of Hansen Transmissions, to name just three – were done through buying out PE fund’s stake in these companies. According to sources, at approximately $3.5 billion, total investments by private equity investors during the first six months of 2006 already surpassed the investments made during the entire 12 months of 2005, which were $2.2 billion. SCPE, which previously struck acquisition deals in Singapore ($450 million acquisition finance Nat Steel in 2005) and Malaysia (SCPE was the leading investor in the management buyout of Unza Holdings), is likely to announce at least one buyout transaction in the country soon. Anil Khatod, managing director of Argonaut Private Equity, which has committed $65 million in PE deals in India, said the three fundamental requirements for acquisition deals – opportunity to unlock significant unrealised value in the entity, availability of financing and maturity of financial markets and an open regulatory environment – were beginning to take shape in the country. “Valuations in India are rich at this time, but there is also a lot of potential for growth and creating significant value. There is plenty of liquidity in private equity market, and financial markets are maturing along with the opening of regulations. These factors make India a good emerging environment for buyout deals,” he said. Argonaut, Khatod said, was looking at deals in several distinct sectors including manufacturing, infrastructure, technology and services in coming months. “Real estate is the only sector we have stayed away from so far,” he said.

Brokerage firms plunge into pvt equity, realty funds

From Business Standard

October 05, 2006

A clutch of top brokerage and financial services firms, led by Motilal Oswal Financial, AnandRathi Securities, Edelweiss Capital, JM Financial, Religare and IDBI Capital Markets, is venturing into the booming private equity (PE) and real estate sectors by launching funds. The move is to tap the growing number of rich and the super-rich investors. While Motilal Oswal is expected to close $100 million private equity fund, India Business Excellence Fund (IBEF), in next few days, AnandRathi is raising Rs 500 crore for a real estate fund. Broking and financial services firm JM Financial has already raised Rs 415 crore through its JM Financial India Fund. IDBI Capital Markets, the broking subsidiary of IDBI, has entered the PE space by mobilising Rs 50 crore from its parent for PE investments and Religare, the financial services arm of Ranbaxy’s promoter-family, has launched $150 million private equity fund with US-based Evercore Partners. Edelweiss Capital, which has 30 per cent stake in private equity fund Blue River Capital, also has a real estate fund with Rs 150 crore corpus. Industry sources said brokerage houses are entering these booming segments as their research teams can identify potential candidates for private equity investments while leveraging their branch network to lure high-networth investors (HNIs). “We want to give our clients a complete bouquet of wealth management products. The entry into private equity business is part of this strategy,” said Motilal Oswal, chairman of MOFL, which will manage its private equity fund through its wholly owned subsidiary Motilal Oswal Venture Capital Advisory. Oswal also said the PE fund was also getting investors from domestic markets as well. “We are targeting HNIs and super HNIs who want to de-risk their investments from the secondary market. These are investors who are willing to wait for 4-5 years for getting returns on their investments,” he said. “Currently, India is the hot topic among global investors and hence it is relatively easy to mobilise funds, be it be private equity or real estate,” said CJ George, managing director of Geojit Financial Services. George, however, ruled out any such plans for Geojit Financial Services in the near term. A top official of Edelweiss Capital said, “There are umpteen number of unlisted companies which are doing exceedingly well. Yet, these companies are looking for funds to meet their expansion plans. PE funds offer a win-win situation for company and investors. “ Edelweiss has recently pumped in $10.2 million PE investment into Aurangabad Electricals. Nimesh C Shah, managing director of Fortune Financial Services (India), said the company was seriously looking launching a PE fund in the future. “A PE fund will be a logical extension of our wealth management services. We may start a PE fund in the future,” Shah said.

US fund to invest Rs 45 crore in Eastern Condiments

From Business Standard

October 04, 2006

The US-based private equity fund, New Vernon Private Equity Limited (NVPEL), has decided to invest Rs 45 crore in Kochi-based masala major, Eastern Condiments, the flagship company of Eastern Group. About 15 per cent of the equity will be allotted to NVPEL through the preferential allotment route and two of its directors will be appointed on the board of the company. Addressing a press conference here, Navas Meeran, managing director, Eastern Group, said that the company had gone in for fresh investments to expand and consolidate its core activity of curry powder manufacturing. He said that the new capital would be used for expanding the company’s pan India footprint. “We are focusing on the South-West corridor as the main area of expansion in the next 3-5 years. We have already established a sizeable presence in Mumbai with a sale of 20 tonnes of curry powder every month,” he added. The company has already planned to enter the capital market with an IPO within the next 36 months as part of its huge expansion plan with an employee stock option scheme. Its major focus area within one year would be on the capacity expansion by opening two factories each at Kothamangalam in Kerala and Gudur in Andhra Pradesh. The two factories would have 100-tonne production capacity a day. He said that Rs 20 crore would be spent on the proposed capacity expansion projects and make Eastern a Rs 1000-crore company within next five years. Another focus area of the company would be to introduce latest low oxygen technology. In the current fiscal, Eastern Condiments projected a net profit of Rs 21 crore on a total sales turnover of Rs 163 crore. The company, which sells one million curry powder packets a day, earned a net profit of Rs 18 crore on a total sales turnover of Rs 122 crore during the last fiscal. The company has signed an agreement with the Trinetra retail chain and expects similar pacts with Reliance Retail Limited soon. Navas Meeran said that the company had planned to make foray into north India after consolidating its operations in the South and Maharashtra.

Ranbaxy eyes US firm, in talks with private equity players

From The Times of India
October 04, 2006

Too much was never enough for Malvinder Singh. Since the time he took over Ranbaxy, the aggressive CEO has been on an acquisition spree. In his sights now is the US-based privately held URL/Mutual Pharmaceuticals. And if the deal goes through, it could well be the largest acquisition, ever, by an Indian company. With sales in the region of $350 million, market sources say Ranbaxy will have to shell out anywhere between $800 million to $1 billion to gain control. Sources close to Ranbaxy say the company is completeing the due diligence process for URL/Mutual even as its talks to private equity investors to raise funds to close the deal. “The valuations are high because there are other global generic companies keen to grab URL/Mutual,”said a source. When contacted, Ranbaxy’s spokesperson said, “Our strategy is to grow organically and through acquisitions. But, we do not comment on market speculation.”URL/Mutual has a wide range of generic products in the US market. It invests over 20% of revenues into Research and Development (R&D) programs. The company also has a range of Abbreviated New Drug Application (ANDA) for injectible products. “Due to competition in generics, margins in US are thin. US firms cannot operate on such thin margins and URL/Mutual is also feeling the brunt. That is why it wants to sell out,”said an analyst. Ranbaxy is one of the players in the generics game that has learnt to successfully play around low margins, he added. Te acquisition also fits in with Ranbaxy’s target of $2 billion in sales by 2007. Ranbaxy is also actively looking at the European market for acquisitions to bring down overhead costs. “The acquisition will result in higher revenues from Ranbaxy’s US operations,”said an analyst. According to a analysts’ reports, Ranbaxy witnessed 8% growth in US in the second quarter with sales touching $89 million. The company clocked the same growth for the first half this fiscal and the US market contributed 15.2% of the company’s revenues. Though the deal may augur well for Ranbaxy, other players feel that large acquisitions will be bad news for other Indian pharmaceutical companies. “Such acquisitions may impact growth plans of mid-size and small companies as they increase the valuations in the already heated market,”said joint MD of a mid-size pharmaceutical company.

Koutons plans second stake sale, eyes IPO in FY08

From Reuters.com

October 04, 2006

Apparel maker Koutons Retail India Pvt. Ltd. plans to offload about 8-9 percent equity by December to raise about 700 million rupees to fund its expansion, a top company official today. This would be the company’s second offering to private investors after it sold a 4.5 percent stake in July to private equity firm UTI Ventures, raising 270 million rupees. “We are (also) looking at an IPO in the first quarter of fiscal 2007/08,” Managing Director D. P. S. Kohli told a news conference held to announce the launch of a youth-wear line branded ‘Charlie Outlaw’ for the age group 16-24 years.The company will dilute about 12-15 percent in the initial public offer to raise 1.2-1.3 billion rupees, Finance Controller Ajay Mahajan said. After the stake sale and IPO, the promoters’ holding in Koutons would come down to about 71 percent. Kohli and his two brothers-in-law had about 33 percent each in the company before the first stake sale to UTI Ventures. The company would invest about 3.25 billion rupees over three years to expand production, warehousing and retail facilities, Kohli said. Koutons, which makes makes men’s wear for the Indian market, also has plans for a women’s and kids wear line in addition to a footwear collection, Executive Vice President H.S. Sidhu said. The firm’s 2005/06 turnover was 1.58 billion rupees. It is aiming at a turnover of 4.25 billion rupees this fiscal, Kohli said.

IPO-wary firms woo private equity

From Business Standard

October 04, 2006

Shirdi Industries, Vigneshwara Exports and Bluplast Industries, which had earlier withdrawn their initial public offerings (IPOs) owing to lack of investors’ interest, are negotiating with a string of private equity investors to raise funds for their expansion plans. They have ruled out hitting the IPO market in the next 6 -12 months. According to investment banking sources, the companies are looking at selling stakes to private equity players through the private placement route to fund their immediate expansion plans. The IPOs of the three companies were to hit the market in June. However, the stock market meltdown, which saw the index shedding by 30 per cent and forcing investors to stay away from the markets, had led to the companies shelving their IPO plans. Vigneshwara Exports and Bluplast were planning to mobilise Rs 60 crore and Rs 30 crore respectively. Shirdi Industries’ IPO size was Rs 43 crore. Navjeet Singh Sobti, managing director, Allianz Securities, which was one of the lead managers for Shirdi Industries, said the company is looking to place its equity with a private party. “We are in negotiations with some of the players. But, it may take some time to finalise the deal,” he said. The most important part of these deals is that the private investor gets a place on the board, which is very important from the investor’s point of view,” Sobti added. Similarly, Bluplast Industries is in the final stages of privately placing a part of the stake to select investors at around Rs 50 per share, which is higher than its IPO price band of Rs 28-32 per share. “We expect to complete the private placement by the next 1 to 2 months. But, we would not be coming out with IPO at least for the next one year,” said Shashinand Nagori, compliance officer at Bluplast. Analysts said a pre-IPO placement would help companies to realise a benchmark valuation for the company before they actually come out with the IPO. However, Girish Nadkarni of IL&FS Investsmart said that despite more numbers of private equity placements happening before IPOs, it is not a must for every firm. “If a firm is coming out with good performances, then it is a prized deal for the investor. In a recent case, an equity player even faced loss, as the IPO did not bring him expected result,” he said.

Idea to get Providence Equity bounty

From Daily News & Analysis
October 04, 2006

Providence Equity Partners, a leading private equity fund based in the US, is expected to pick up a sizeable stake in Idea Cellular – the Aditya Birla group’s mobile telephony business. Idea Cellular, the fifth largest mobile telephony company in what is the fastest growing mobile telephony market, is expected to close the deal in a few days, sources close to the development said. Aditya Birla group holds nearly 98.3% stake in Idea Cellular. About 26-30% of Idea stake is expected to change hands, the sources said, adding, the deal could fetch Rs 2,750-3,000 crore for the promoter group. Providence Equity Partners specialises in equity investment in communications and media companies around the world. Sanjeev Aga, managing director of Aditya Birla Nuvo – the lead group company that owns a large chunk of Idea – excused himself from confirming this saying he was in the midst of a conference call. Just after they acquired the Tatas’ stake in Idea Cellular, the Birlas had announced plans to sell at least 33% of Idea Cellular. It is not yet certain whether the sale will involve fresh equity or whether the Birlas will unload part of their stake. For the Birlas, it is a savvy deal as only in April this year, the group purchased the entire 48.12% holding of the Tata group, its erstwhile partner, after some public sparring for Rs 4,406 crore. The deal then put a value to Idea Cellular at about Rs 9,000 crore. If the Providence deal comes through, the value of Idea Cellular has appreciated smartly in just five months, by a couple of thousand crores. The accretion in valuation of Idea could be attributed to the cessation of ownership issues and also because focus on growth has returned. Idea Cellular now has 10 million subscribers, one million more than what it had a couple of months ago. Idea’s network covers 9 of the 23 circles making up India’s telecoms sector. However, it has applied for the rest of the sectors including the Mumbai circle. The principals of Providence Equity manage funds with over $9 billion (Rs 41,000 crore) in equity commitments, including Providence Equity Partners V, a $4.25-billion private equity fund, and have invested in more than 80 companies operating in over 20 countries. The investment objective of the US-based private equity firm has been to create value by providing entrepreneurs with the capital, industry expertise and broad network of relationships necessary to build companies that can shape the future of the communications and media industries. “Our current and previous areas of investment include wireless and wireline telephony, cable television content and distribution, publishing, radio and television broadcasting, and other media and communications sectors,” says the company’s website. All of which mean, Idea Cellular fits Providence’s investment objective to a tee.

WL Ross Makes First India Investment with Acquisition of OCM

From Yahoo Finance

October 03, 2006

WL Ross & Co. LLC, global private equity investor in corporate restructurings enters India with the acquisition of OCM India Limited for $37 million in cash (Rs. 170 crores). OCM has a state-of-the-art worsted textile manufacturing facility that is one of the first ISO 9001 certified mills in India. It is vertically integrated, from fiber to fabric and has 34,000 spindles, 185 looms and 12 auto coners. OCM is one of the leading brands in the worsted fabric market and well known for its tweed and jacket suitings sold through 60 wholesalers and over 1,200 retailers across the country, and also markets globally. WL Ross entered the textile industry in 2003 through the acquisition of Cone Mills and Burlington industries to create one of the largest textile companies in the world International Textile Group (ITG) with investments in US, Mexico, Latin America, China, Vietnam and Nicaragua. ITG products include denim, synthetics, worsted wool and cotton fabrics for apparel and interior furnishings which are produced, marketed and sold globally. Mr. Wilbur L. Ross, Jr., Chairman and CEO of WL Ross said, “OCM establishes us in India’s textile sector and further adds to the resources and synergies of our textile holdings. We expect rapid growth there in the future.” The acquisition of OCM is being made pursuant to a Scheme of Arrangement between Birla VXL Limited and its existing lenders, creditors and shareholders and OCM and its shareholders and being carried out through The Asset Reconstruction Company of India Ltd (ARCIL). Mr. Sudhamoy Khasnobis, Managing Director & CEO of ARCIL stated “the OCM acquisition is the first 100% buyout of a major Indian enterprise by a global turnaround fund.” The acquisition was developed by WL Ross’ $300 million India Asset Recovery Fund L.P., with co-investment from WLR Recovery Fund III LP and the Housing Development Finance Corporation Ltd (HDFC), WL Ross’ partner in India. Mr. Deepak Parekh, Chairman of HDFC said, “Our relationship with WL Ross provides a unique solution to Indian entrepreneurs and financial institutions that consider trust and turnaround expertise as cornerstones of any transaction.” Mr. Ranjeet Nabha, Managing Director and CEO of WL Ross’ India initiatives said, “We are proud to be the first foreign fund selected by ARCIL to rehabilitate a portfolio company, and we hope to apply our basic industry skills to other special situations in India.” WL Ross has sponsored over $4.5 billion (Rs. 20,000 crores) of alternative investments since its founding in 2000. WL Ross’ notable principal transactions include rolling up five bankrupt US steel companies into the International Steel Group, which was sold in 2005 to Mittal Steel for $4.5 billion. Mr. Ross is a member of the board of directors at Arcelor Mittal. WL Ross opened its India office in Mumbai five months ago.

Indian developers queue for IPOs, foreign funds

From Moneycontrol.com
October 03, 2006

Tens, and even hundreds, of Indian developers are lining up to raise funds through initial public offerings in an attempt to ramp up construction to fill an estimated shortfall of 20 million homes. Many of the companies are small and hope that by raising their profile, they will also attract funds from abroad. Foreign property investors, who have earmarked around USD 5 billion for India’s vibrant economy, are struggling to identify reliable local partners who can navigate through the country’s notorious red tape and often dubious property titles. Only a handful of developers are listed. And their scarcity during a property boom has contributed to up to nine-fold stock price gains for some firms since the start of 2005, when India eased rules on inward investment in the construction industry. Anish Jhaveri, director of equity sales at HSBC in India, said hundreds of companies were hungry for funds. But they were small and might lack the skills and capacity to deliver rapid growth investors were after. “Between 50 and 80 companies will be listed on a yearly basis in the next three years,” Jhaveri said on a trip to introduce 11 Indian developers to private equity investors in Hong Kong. “But we’ll see a difference between the men and the boys, those who can execute projects, and those who can’t. Ultimately, there’ll be consolidation in around five years’ time.” After heady gains, the Mumbai stock market slid in May and held up many IPOs this year, including a planned listing by DLF Universal, which developed the New Delhi suburb of Gurgaon. But now the market has recovered, DLF is planning to resurrect a share sale it hoped would raise up to USD 3.5 billion. Jhaveri said several other firms, including New Delhi-based Parsvnath Developers and Sobha Developers in Bangalore, have filed for IPOs, and Ambuja Realty Development is expected to follow suit.

Gammon India unit’s IPO delayed

From HindustanTimes.com
October 03, 2006

Construction firm Gammon India Ltd’s initial public offering of its infrastructure unit will be delayed, as it awaits better valuations, a senior official of the unit said on Thursday. Gammon Infrastructure Projects Ltd is waiting for the outcome of bids for projects worth Rs 170 billion, which could raise valuations sharply, its managing director, Parvez Umrigar, told Reuters. “We will take a call on the IPO in a couple of months, based on these bids which will give us better valuations,” he said. The company had filed its draft offer document with the markets regulator in April. Gammon India holds a 87.5 per cent stake in the infrastructure unit and US-based private equity investor Oxif holds the rest. Gammon is also in talks with several private equity players to sell more stake in the infrastructure unit, Umrigar said. “In all, we are looking to dilute about 20 percent of equity,” he said, referring to the IPO and the private placement. Gammon shares were down 0.13 per cent at Rs 349.50 in the Mumbai market.

Wall Street takes over Indian M&A Avenue

From Daily News & Analysis
October 02, 2006

The mergers & acquisitions (M&As) space has already seen outbound deals — whereby Indian companies bought entities abroad — lapping those that moved the other way. There is another telling story in the trend: India’s M&A Street has been truly taken over by the big brothers of Wall Street. To wit: Kotak Mahindra Capital Company, which was the numero uno Indian investment bank of last year — having outdone the likes of Morgan Stanley and Merrill Lynch (Kotak had the world’s No. 1 investment bank, Goldman Sachs, by its side then) — is not even present in the list of top 20 dealmakers in the nine months up to September 30, 2006, Bloomberg League tables show. An investment banker, who did not wish to be named, said Kotak’s no-show is a direct result of its parting of ways with Goldman Sachs. “Goldman Sachs is an extremely powerful entity. If you don’t have large set-ups in the US and Europe, you have little chances of participating in the big deals.” And another Indian dealmaker, ICICI Securities, which was ranked 6th last year, has fallen out of the list, too. Among other pure Indian dealmakers, Ambit Corporate Finance has slipped from 8th to 11th. On the other hand, Yes Bank made the cut this year purely because of steering Suzlon Energy’s 465 million euro ($565 million) buyout of Belgian firm Hansen Transmission in March this year. Munesh Khanna, managing director, investment banking, DSP Merrill Lynch, says more and more M&A deals will be dominated by global banks. “This is simply because the larger deals emanate from cross-border transactions.” DSP Merrill Lynch itself hopes to bounce back in the league tables in the last quarter of this calendar year as the $736 million buyout of Matrix Laboratories by US-based Mylan Laboratories is in the process of being sewn up this month. Vineet Suchanti, managing director of Keynote Corporate Services Ltd, says international banks are much better placed when it comes to cross-border acquisitions. “In the process, the local M&A advisors are increasingly getting relegated to playing a marginal role or steering smaller deals of $10 million to $40 million,” he said. There is indeed a sheaf of smaller local advisors executing cross-border work by leveraging the strengths of associates — who, too, are small advisors — abroad. “We are ourselves working on a couple of transactions in the US, through associates. We are also helping some US companies finalise their India entry strategies. Guys like us have to take the consortium approach,” says Suchanti. What goes in the Indian dealmaker’s favour, says Suchanti, is the fact that right now Indian companies are buyers. “So, primarily you need an associate overseas to identify the right companies and do the right research. Since you know the Indian client, he wants you to be around when the deal is signed. This ensures business for the smaller dealmakers.” Another US-based investment banker said there have been some notable local transactions, too, this year. “Some of them, like the Reliance demerger, have been included in the list. Nobody disputes this, as even we would have taken credit for such deals if we were involved in it,” he said. “But these are not pure M&As as we know them.” Rama Mohan Rao, managing director, UTI Securities, says that private equity has been playing an increasingly defining role on Deal Street. “More promoters are preferring private equity to downright M&As. We’re also advising on a couple of them.” Within India’s borders, the Idea Cellular stake deal between the Tatas and the A V Birla group remains the only significant one in the year so far.